The History of Minnesota and Tales of the Frontier

Section 5 of Article Ix.:

"For the purpose of defraying extraordinary expenses the state may contract debts, but such debts shall never in the aggregate exceed two hundred and fifty thousand dollars." And another clause found in section 10, which is as follows: "The credit of the state shall never be given or loaned in aid of any individual, association or corporation."

It was the intention of the framers of the constitution to prevent the legislature from ever using the credit or funds of the state in aid of any private enterprise, and these provisions effectually accomplished that end.

The people were deeply disappointed when they became convinced that the roads could not be built with the aid that congress had extended, and as this work was also looked upon as the only hope of financial relief, the case became a desperate one, which could only be remedied by the most extreme measures. The promoters of the railroads soon discovered one, in an amendment of the section of the constitution which prohibited the credit of the state being given or loaned to anyone, and at the first session of the first legislature, which convened on Dec. 3, 1857, an act was passed proposing such amendment, to be submitted to the people for ratification. The importance of this amendment, and its effect and consequences upon the future of the state, demands that I give it nearly in full. It changed section 10 as it was originally passed, and made it read as follows:

"Section 10. The credit of that state shall never be given or loaned in aid of any individual association or corporation, except that, for the purpose of expediting the construction of the lines of railroads, in aid of which the congress of the United States has granted lands to the Territory of Minnesota, the governor shall cause to be issued and delivered to each of the companies in which said grants are vested by the legislative assembly of Minnesota the special bonds of the state, bearing an interest of seven per cent per annum, payable semi-annually in the city of New York, as a loan of public credit, to an amount not exceeding twelve hundred and fifty thousand dollars, or an aggregate amount to all of said companies not exceeding five millions of dollars, in manner following, to-wit:"

The amendment then prescribes that, whenever ten miles of railroad was graded so as to be ready for the superstructure, it should receive $100,000 of the bonds, and when ten miles should be completed with the cars running, the company so completing should receive another $100,000 of the bonds until each company had received its quota. The bonds were to be denominated "State Railroad Bonds," for the payment of which the faith and credit of the state was to be pledged. The railroad companies were to pay the principal and interest of the bonds, and to secure such payment they were to pledge the net profits of their respective roads, and to convey to the state the first two hundred and forty sections of land they received, and to deliver to the state treasurer an amount of their first mortgage bonds equal to the amount of bonds received by them from the state, and mortgage to the state their roads and franchises. This was all the security the companies could give, but the underlying difficulty was that it had no value whatever. There were no roads, no net or other profits. The lands had no value whatever except such as lay in the future, which was dependent on the construction of the roads and the settlement of the country. The bonds of the companies, of course, possessed only such value as the property they represented, which was nothing, and the mortgages were of the same character. The whole scheme was based upon hopes, which the slightest application of sober reasoning would have pronounced impossible of fulfillment. But the country was hungry, and willing to seize upon anything that offered a semblance or shadow of relief.

The proposed amendment was to be submitted to the people for adoption or rejection, at an election to be held on the fifteenth day of April, 1858. In order to fully comprehend the condition of the public mind, it should be known that the constitution, with all the safeguards that I have mentioned, had only been in force since Oct. 13, 1857, a period of about six months, and had been carried by a vote of 30,055 for to 571 against its adoption.

The campaign preceding the election was a very active one. The railroad people flooded the state with speakers, documents, pictures, glee clubs singing songs of the delights of "Riding on the Rail," and every conceivable artifice was resorted to to carry the amendment. It was carried by a vote of 25,023 in favor of its passage, to 6,733 against.

To give an idea of the intense feeling that was exhibited in this election, it is only necessary to state that at the city of Winona there were 1,102 votes cast in favor of the amendment and only one vote against it. This negative vote, to his eternal honor be it said, was cast by Thomas Wilson, afterwards chief justice of the state, and now a citizen of St. Paul.

In the execution of the requirements of the amendment, the railroad companies claimed that they could issue first mortgage bonds on their properties to an indefinite amount and exchange them with the state for its bonds, bond for bond, but the governor, who was Hon. Henry H. Sibley, construed the amendment to mean that the first mortgage bonds of the companies which the state was to receive must be an exclusive first lien on the lands and franchises of the company. He therefore declined to issue the bonds of the state unless his views were adopted. The Minnesota & Pacific Railroad Company, one of the land grant corporations, applied to the supreme court of the state for a writ of mandamus, to compel the governor to issue the bonds. The case was heard, and two members of the court holding the views of the applicants, the writ was issued. I was a member of the court at that time, but entertaining opposite views from the majority, I filed a dissenting opinion. Anyone sufficiently interested in the question can find the case reported in Volume II. of the Minnesota Reports, at page 13. This decision was only to be advisory, as the courts have no power to coerce the executive.

The railroad companies entered into contracts for grading their roads, and a sufficient amount of grading was done to entitle them to about $2,300,000 of the bonds, which were issued accordingly, and went into the hands of the contractors to pay for the work done. It, however, soon became apparent that no completed railroad would ever result from this scheme, even if the whole five millions of bonds were issued. What should have been known before was made clear when any of these state bonds were put on the market. The credit of the state was worthless, and the bonds were valueless. The people became as anxious to shake off the incubus of debt they had imposed upon their infant state as they had been to rush into it.

Governor Sibley, in his message, delivered to the second legislature in December, 1859, said, in speaking of this issue of bonds:

"I regret to be obliged to state that the measure has proved a failure, and has by no means accomplished what was hoped for it, either in providing means for the issue of a safe currency, or of aiding the companies in the completion of the roads."

At the election, held on Nov. 6, 1860, the constitution was again amended, by expunging from it the amendment of 1858 authorizing the issue of the state railroad bonds, and prohibiting any further issue of them. An amendment was also made to section 2 of Article IX. of the constitution at the same time, by providing that no law levying a tax, or making any other provisions for the payment of interest or principal of the bonds already issued, should take effect or be in force until it had been submitted to the people, and adopted by a majority of the electors.

It was very proper to prohibit the issuance of any more of the bonds, but the provision requiring a vote of the people before those already out could be paid was practically repudiation, and the state labored under that damaging stigma for over twenty years. Attempts were made to obtain the sanction of the people for the payment of these bonds, but they were defeated, until it became unpleasant to admit that one was a resident of Minnesota. Whenever the name of Minnesota was heard on the floor of congress as an applicant for favors, or even for justice, it was met by the charge of repudiation. This was an era in our history very much to be regretted, but the state grew steadily in material wealth.

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